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Foreign holdings of Chinese onshore assets grew by the fastest rate since 2014 in the second quarter of this year due to solid economic growth in China, and declining fears about yuan depreciation.

Foreign ownership rose by 528 billion yuan (US$78.7 billion) in the second quarter according to figures from the People’s Bank of China, to stand at 3.76 trillion yuan at the end of June. The growth was seen across equities, bonds, loans and deposits, and analysts expect the trend will continue.

“We expect foreign holdings of China onshore assets to revisit an all-time high of 4.6 trillion yuan (first seen in May 2015) by the end of 2017 on slower capital outflows, an improved FX outlook and solid economic growth,” Becky Liu, head of China macro strategy at Standard Chartered, said in a report published on Wednesday.

This marks a reversal from the latter half of 2015 and 2016 when foreign ownership of Chinese onshore assets declined markedly as investors were concerned about the falling yuan hurting their investments, while heightened fears of a “hard landing” in China also affected confidence.

At the end of December 2016 foreign ownership of Chinese onshore assets had fallen to just over 3 trillion yuan.

Foreign ownership of Chinese onshore bonds increased by 62 billion yuan in the three months to the end of June to stand at 892 billion yuan, with Chinese government bonds accounting for 29 billion yuan of the amount.

“We expect the current strong momentum to continue and foreign holdings of China onshore bonds to exceed one trillion yuan in the third quarter of 2017,” Liu said.

Nonetheless, despite the rise, and the potential for further increases following the launch of bond connect, foreign ownership still accounts for just a fraction of Chinese bonds, just 1.3 per cent of the whole Chinese bond market at the end of June.

Indeed, the 5 per cent rise in foreign ownership of Chinese bonds was still lower than the 7 per cent rate at which the market grew overall.

Foreign ownership of Chinese equities rose by 12 per cent in the second quarter, or 91 billion yuan, and stood at 868 billion yuan at the end of June.

“With the current economic strength in China being confirmed despite recent tightening and now being joined by significant reform momentum, the environment has rarely been this good for Chinese equities,” said Douglas Morton, head of research for Northern Trust Capital Markets.

“Particularly as the Chinese yield curve continues to steepen, southbound flows build alongside Hong Kong turnover and the demand for international A share exposure has increased tenfold in the last four months,” he said in a note to clients on Wednesday.